Abstract

https://ssrn.com/abstract=1321646
 
 

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Securitization and Distressed Loan Renegotiation: Evidence from the Subprime Mortgage Crisis


Tomasz Piskorski


Columbia Business School - Finance and Economics

Amit Seru


Stanford University

Vikrant Vig


London Business School

April 15, 2010

Chicago Booth School of Business Research Paper No. 09-02
AFA 2010 Atlanta Meetings Paper

Abstract:     
We examine whether securitization impacts renegotiation decisions of loan servicers, focusing on their decision to foreclose a delinquent loan. Conditional on a loan becoming seriously delinquent, we find a significantly lower foreclosure rate associated with bank-held loans when compared to similar securitized loans: across various specifications and origination vintages, the foreclosure rate of delinquent bankheld loans is 3% to 7% lower in absolute terms (13% to 32% in relative terms). There is a substantial heterogeneity in these effects with large effects among borrowers with better credit quality and small effects among lower quality borrowers. A quasi-experiment that exploits a plausibly exogenous variation in securitization status of a delinquent loan confirms these results.

Number of Pages in PDF File: 57

Keywords: Securitization, renegotiation, bargaining, servicing, incentives, subprime, crisis, defaults, mortgages

JEL Classification: G21


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Date posted: December 31, 2008 ; Last revised: August 20, 2011

Suggested Citation

Piskorski, Tomasz and Seru, Amit and Vig, Vikrant, Securitization and Distressed Loan Renegotiation: Evidence from the Subprime Mortgage Crisis (April 15, 2010). Chicago Booth School of Business Research Paper No. 09-02; AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1321646 or http://dx.doi.org/10.2139/ssrn.1321646

Contact Information

Tomasz Piskorski (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

Amit Seru
Stanford University ( email )
650 Knight Management
Stanford, CA 94305
United States
Vikrant Vig
London Business School ( email )
Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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